Exercise 13-2 (Algo) Dropping or Retaining a Segment (L013-2) The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Dirt Mountain Racing Total Bikes Bikes Bikes $ 927,000 $269,000 $ 406,000 $ 252,000 462,000 118,000 194,000 150,000 465,000 151,000 212,000 102,000 Sales Variable manufacturing and selling expenses Contribution margin Pixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses. Total fixed expenses Net operating income (losa) 70,500 9,000 40,800 20,700 44,000 21,000 7,200 15,800 114,500 40,400 39,000 35,200 185,400 53,800 81,200 50,400 414, 400 124,200 168,200 122.000 $ 50, 600 $ 26,800 $ 43,800 $120,000) "Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial (disadvantage) per quarter Rogue Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Reafired 2 Required 3 Should the production and sale of racing bikes be discontinued? TOYes Ono Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long- run profitability of the various product lines. Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 Contribution margin (loss) Traceable fixed expenses 0 0 0 Total traceable fixed expenses Product line segment margin (18) 0 $ 0 $ 0 $ 0 $ 0 Net operating income (108)